(Appendix 5A) Hiss Corporation's activity for the last six months is as follows:

-Using the high-low method of analysis,the estimated monthly fixed component of lubrication cost is closest to:
A) $1,120
B) $1,140
C) $1,170
D) $1,130

Question

(Appendix 5A) Hiss Corporation's activity for the last six months is as follows:
 
-Using the high-low method of analysis,the estimated monthly fixed component of lubrication cost is closest to:
A) $1,120 
B) $1,140 
C) $1,170 
D) $1,130

Quizplus · Accepted Answer

11ea7761_188f_29bd_81a5_310a0f81e171_TB2580_00 Variable cost = Change in cost ÷ Change in activity = $240 ÷ 160 machine hours = $1.50 per machine hour
Fixed cost = Total cost - Variable cost
Fixed cost = $1,740 - ($1.50 per machine hour × 400 machine hours) = $1,140

(Appendix 5A) Hiss Corporation's Activity for the Last Six Months